"They (government) are trying to create market for pension products offered by insurance companies in the backdrop of government raising FDI in the sector to 49 per cent from 26 per cent," he added.

Jaitley has said the purpose of taxing interest earned on 60 per cent of withdrawals of contribution made after April 1, 2016 was to encourage people to invest in annuity or pension schemes.

Continuing to face flak for proposing a tax on employee provident fund withdrawals, Jaitley today said he will spell out the final decision on the matter when he replies to the debate on Budget in Parliament.

RSS-backed Bhartiya Mazdoor Sangh President B N Rai described Jaitley's contention as "lameduck argument". He said, "There is Employees' Pension Scheme, 1995 run by EPFO which provides for pension after the age of 58 years to its subscribers. Then where is the need for encouraging pension."

Rai argued that there is no provision of taxing EPF withdrawals in the EPF & MP Act. "It is neither law nor practice. On what basis government want to tax EPF withdrawals? It will amount to double or triple taxation," he said.

Trade unions are up in arms against against Jaitley's budgetary proposal to tax part of the EPF withdrawals. Breaking from the long-held practice of exemption at all stages, the Budget for 2016-17 has proposed to impose tax on EPF withdrawal on 60 per cent of contributions made after April 1, 2016, to EPF and other such schemes.

At present, social security schemes run by retirement fund body EPFO are tax free 'Exempt-Exempt-Exempt (EEE)' scheme under which deposits, accrual of interest and withdrawals are tax free.

It is also proposed to tax employers' contribution of over Rs 1.5 lakh towards a worker's EPF account in a year. At present, there is no such limit.